New Economics Papers
on Law and Economics
Issue of 2009‒12‒19
seven papers chosen by
Jeong-Joon Lee, Towson University

  1. Divorce laws and divorce rate in the U.S By Stefania Marcassa
  2. Promoting Competition to Strengthen Economic Growth in Belgium By Tomasz Kozluk
  3. Is Posner's Principle of Justice an Adequate Basis for Environmental Law? By Tisdell, Clem
  4. The Influence of International Law on the International Movement of Persons By Opeskin, Brian
  5. Beyond the Financial Crisis: Addressing risk challenges in a changing financial environment By Ojo, Marianne
  6. The growing importance of risk in financial regulation By Ojo, Marianne
  7. Discontinuous Behavioral Responses to Recycling Laws and Plastic Water Bottle Deposits By W. Kip Viscusi; Joel Huber; Jason Bell; Caroline Cecot

  1. By: Stefania Marcassa
    Abstract: At the end of the 1960s, the U.S. divorce laws underwent major changes and the divorce rate more than doubled in all of the states. The new laws introduced unilateral divorce in most of the states, and changes in divorce settlements, such as property division and child custody assignments in every state. Empirical literature has focused on the switch from consensual to unilateral divorce and found that this change cannot fully account for the increase in the divorce rate. What previous literature has ignored is other aspects of the legal change, and their effect on divorce rate in states where the decision remained consensual. In this paper I show that changes in divorce settlements provide economic incentives for both spouses to agree on divorcing. I solve and calibrate a model where agents differ by gender, and wages, and make marital status, investment, and labor supply decisions. Under the new financial settlements, divorced men gain from a favorable division of property, while women gain from an increase in joint child custody assignments. Since both of them are better off in the new divorce setting, the requirement of consent for divorce is not longer necessary. Results show that changes in divorce settlements account for a substantial amount of the increase in the divorce rate in both the unilateral and the consensual regime. I also find that the increase in divorce rate of young couples with children contributes the most in the overall increase, and this is consistent with the data.
    Date: 2009
  2. By: Tomasz Kozluk
    Abstract: Prices for many goods and services in Belgium are higher than in other countries, reflecting generally weak competitive pressures. The government has recently introduced several reforms to strengthen the competition policy framework. Nevertheless, to reap the full benefits of competitive markets, past reforms should be complemented with a number of further measures. The powers of the Competition Authority can still be enhanced. Its effective degree of independence, substantially improved in the recent reform, and its accountability should be monitored in order to assess whether further measures in this direction are needed. In the retail sector competition-restricting regulations still protect existing companies against new entry and inhibit the diffusion of new business models and technologies. The reform efforts in the network sectors remain patchy. In the energy and telecommunication sectors the main issues are the dominant positions of the incumbents and the failure of network sector regulators to introduce a level playing field in order to allow new entry and expansion of competitors. In other sectors, such as postal services and rail transport, major steps towards liberalisation are still to come. Overall, sectoral regulators will need more independence and powers in order to tackle uncompetitive behaviour of the incumbents, while better communication between the regulatory authorities is necessary. These steps should help to secure the necessary basis for bringing productivity growth in line with best performance.<P>Promouvoir la concurrence afin d’affermir la croissance économique en Belgique<BR>Les prix d’un grand nombre de biens et de services en Belgique sont plus élevés que dans d’autres pays, signe de la faiblesse générale des pressions exercées par la concurrence. Le gouvernement a récemment introduit plusieurs réformes destinées à renforcer le cadre de la politique de concurrence. Néanmoins, pour tirer tout le profit de marchés concurrentiels, les réformes mises en oeuvre devraient être complétées par un certain nombre de mesures additionnelles. Les pouvoirs de l’Autorité de concurrence peuvent être encore renforcés. Son degré effectif d’indépendance (sensiblement rehaussé par la récente réforme) et son obligation de rendre compte devraient faire l’objet d’un suivi de manière à évaluer si de nouvelles mesures s’imposent à cet égard. Dans le commerce de détail, les réglementations restreignant la concurrence protègent toujours les entreprises en place contre l’arrivée de nouveaux concurrents et freinent la diffusion de nouveaux modèles économiques et de nouvelles technologies. Les efforts de réforme dans les industries de réseau demeurent parcellaires. Dans les secteurs de l’énergie et des télécommunications, les problèmes tiennent surtout aux positions dominantes des opérateurs historiques et à l’incapacité des autorités de régulation des industries de réseau à instaurer des conditions égales pour tous de manière à permettre l’arrivée de nouveaux concurrents et le développement de la concurrence. Dans d’autres secteurs, comme les services postaux et le transport ferroviaire, d’importantes mesures de libération sont toujours en attente. Globalement, les régulateurs sectoriels ont besoin de plus d’indépendance et de plus de pouvoirs pour contrer le comportement anticoncurrentiel des opérateurs historiques, et il est nécessaire d’améliorer la communication entre les autorités de régulation. Ces mesures devraient contribuer à assurer la base nécessaire pour porter la croissance de la productivité au meilleur niveau.
    Keywords: Belgium, competition policy, competition, economic growth, network industries, retail distribution, sectoral regulators, Belgique, commerce de détail, concurrence, croissance économique, industrie de réseau, politique de la concurrence, régulateurs sectoriels
    JEL: K23 L41 L43 L50
    Date: 2009–12–03
  3. By: Tisdell, Clem
    Abstract: Posner adopted the economic principle of wealth maximization as a guiding principle for the dispensation of justice. This resulted in his endorsing the Kaldor-Hicks principle (also known as the potential Paretian improvement principle) as a basis for just laws. This article explores whether this principle is an adequate basis for environmental law. As can be deduced from Fleming, the legal approach adopted by Posner is by no means new because early British tort law was applied in a manner intended to foster economic growth. Nevertheless, the wealth maximization principle is not adequate as a basis for just environmental laws because for one thing it ignores questions involving changes in income distribution. Consequently, Rawlsâ principle of justice is examined and compared with that of Posner. The role of property rights in relation to the state of the environment is assessed in the light of Posnerâs principle of justice, as is Coaseâs theorem supporting a clear definite allocation of private property rights as a solution to environmental problems. Furthermore, in this context, the justification for the taking of private property by the state is examined. It is argued that additional factors to wealth maximization and income distribution must be taken into account in determining whether laws are just. In addition, it is suggested that it is not the sole purpose of the law to dispense justice.
    Keywords: Coase theorem, law and economics, Posnerâs principle of justice, principles of justice, property rights, Rawlsâ principle of justice, tort law, welfare economics, Environmental Economics and Policy, K, K1. K11. K13, K32, Q5,
    Date: 2009–06
  4. By: Opeskin, Brian
    Abstract: Many migration theories identify ‘the law’ as a significant constraint on the international movement of persons. While this constraint often operates through national migration legislation, this study examines the influence of international law in shaping contemporary patterns in the international movement of persons at the macro level. The analysis begins with an examination of the long-established power of a State to regulate cross-border movement of persons as an inherent attribute of State sovereignty, together with the accepted limitations on a State’s power to control entry and exit. Yet, international law reaches well beyond the movement of people across borders. The development of international human rights law has been a key constraint on state action in the United Nations era by also regulating the treatment of migrants within a State’s borders. The study considers how international law has responded to current migration issues, including: protection of migrant women and children; suppression of smuggling and trafficking of people; labour migration; and environmental migration. As in other areas of international society, there has been a proliferation of institutions through which international migration law is made and enforced. The most prominent among them are the United Nations High Commissioner for Refugees (UNHCR) and the International Organization for Migration (IOM), but the establishment of other entities with overlapping mandates has given rise to calls for a new international migration regime based on streamlined institutional arrangements. The study concludes that international law is an imperfect framework for regulating the international movement of persons because it has developed in a piecemeal fashion over a long time to deal with issues of concern at particular points in human history. Yet, despite its shortfalls, international law and its associated institutions unquestionably play a most important role in constraining and channeling state authority over the international movement of persons.
    Keywords: international migration law; admission of aliens; refugees; expulsion of foreign nationals; human rights of migrants; diplomatic protection; migrant workers; international trade in services; environmental migration; migrant women and children; human smuggling and trafficking; United Nations High Commissioner for Refugees; International Organization for Migration
    JEL: K0 O15
    Date: 2009–06–01
  5. By: Ojo, Marianne
    Abstract: The Financial Crisis has not only highlighted the importance of addressing issues such as liquidity risk – it has also brought to the fore the need to focus on unregulated instruments such as hedge funds, which are of systemic importance to the financial industry. Risk is an area which, owing to its increasing significance, requires greater focus. A move to risk based strategies is evidenced by the growing popularity of risk based regulation and meta regulatory strategies. Given the presence of an unregulated hedge fund industry however, such attempts do not suffice on their own. Further, the systemic nature of risk exacerbates the problem of such unregulated institutions. This paper aims to address complexities and challenges faced by regulators in identifying and assessing risk, problems arising from different perceptions of risk, and solutions aimed at countering problems of risk regulation. It will approach these issues through an assessment of explanations put forward to justify the growing importance of risks, well known risk theories such as cultural theory, risk society theory and governmentality theory. These theories will be considered against a background of themes such as dynamism, evolutionism, developments in science and industry, cultural attitudes to risk, and the need to be responsive and reflexive to changes which have arisen in modern society. Theoretical models and hybrids of a responsive model of regulation such as Enforced self regulation and meta regulation, which have the potential to address the problems relating to risk will be addressed. By virtue of the pro cyclical nature of risk, the inability of Basel 2 to address risk cycles were revealed during the Northern Rock Crisis. Other flaws and deficiencies inherent in Basel 2, a form of meta regulation, will be highlighted. The relevance of internal control systems to an efficient system of regulation, the reasons for which meta regulation is not only considered to be the most responsive form of regulation, but also one which assigns central role to internal control systems will be discussed. The contested nature of risk and the difficulties attributed to its quantification, raise questions about its ability to function effectively as a regulatory tool. If risks could be eliminated in their entirety however, then regulation would serve no purpose. This paper aims generally therefore to direct attention to those areas which could be addressed, namely institutional risks, and measures whereby such risks, even though impossible to eliminate, could be minimized.
    Keywords: risk; theories; financial; regulation; Financial; Crisis
    JEL: K2 K0 M42
    Date: 2009–12
  6. By: Ojo, Marianne
    Abstract: This paper traces the developments that have contributed to the importance of risk in regulation. Not only does it consider theories associated with risk, it also discusses explanations as to why risk has become so important within regulatory and governmental circles. Two forms of risk regulation, namely risk based regulation and meta regulation are considered. As well as considering the application of both in jurisdictions such as the UK, the paper places greater focus in discussing the importance of meta regulation in jurisdictions such as Germany, Italy and the US. The preference for meta regulation is based on the premises, not only of the advantages considered in this paper but also on the application of Basel II in several jurisdictions. Whilst meta regulation also has its disadvantages, the impact of risk based regulation on the use of external auditors plays a part in the preference for meta regulation.
    Keywords: risk; regulation; meta; Basel II; financial
    JEL: K2
    Date: 2009–12
  7. By: W. Kip Viscusi; Joel Huber; Jason Bell; Caroline Cecot
    Abstract: This article examines the effects of recycling and deposit laws on consumer recycling of plastic water bottles using a nationally representative sample of 2,550 bottled water users. Economic theory predicts individual behavior that gravitates toward extremes—either diligent recycling or no recycling at all. This pattern is borne out in actual recycling behavior. Both water bottle deposits and recycling laws foster recycling behavior through a discontinuous effect that converts reluctant recyclers into diligent recyclers. More stringent recycling laws have a greater effect on recycling rates. The efficacy of these interventions is greatest for those who would not already recycle and especially for those in lower income groups or who do not consider themselves to be environmentalists.
    JEL: K23 K32 Q50 Q58
    Date: 2009–12

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